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Texas HMOs Soon May Face
A Series of Pro-Patient Rules

The Legislature is preparing to pound HMOs and the rest of the managed health-care industry with a series of proposed pro-patient laws.

In a report to be released next week by the Senate Interim Committee on Managed Care and Consumer Protections, lawmakers will recommend more than three dozen changes to the way managed-care organizations are regulated. If enacted, the laws would be among the most pro-patient health-care rules in the country, reflecting consumer ire at the industry's moves to cut costs and reduce services.

The report will include proposals to improve patient access and treatment, to tighten financial-solvency requirements and to water down some of the competitive practices that have made HMOs so dominant. Other recommendations would make law a series of pro-patient rules that have already been enacted by regulators.

Among the biggest changes:

Allowing regulators from the Texas Department of Insurance to specify maximum waiting times in doctors' offices for scheduled appointments, minimum doctor-patient ratios at a given HMO and maximum distances patients would have to travel to get treatment.

Requiring that the Insurance Department or an independent committee issue an annual report card and rating system for managed-care organizations.

Transferring regulatory oversight for quality-of-care issues to the Insurance Department from the Texas Department of Health, a move that in practice has already occurred.

Forcing HMOs to set aside $1.5 million, up from $500,000, to better protect against financial-solvency problems.

Placing tighter restrictions on financial incentives given to physicians who work for a managed-care plan and preventing many plans from signing exclusivity contracts with their doctors.

An Uneasy Peace

Lawmakers say the recommendations spring from five public meetings held around the state by the committee. Sen. David Sibley, a Waco Republican who led the panel, said "we're trying not to take sides as to [whether physicians or HMOs] will prevail. But ultimately I think it's going to end up being an uneasy peace."

HMO industry officials, whose business has become more reviled and less profitable over the past two years, say they aren't fretting about any individual recommendation. But taken as a whole, they say, the Senate committee's eight categories of new rules could make their lives much more difficult and costly.

"The bottom line is that there's not one single item that really would cost us," says Geoffrey Wurzel, executive director of the Texas Health Maintenance Organization Association, a trade group. "But there are a lot of individual items here. And there's a big potential cost for all of these. So all tied together, they're a big concern."

Passage of any or all of the proposals is impossible to predict at this point. But the Senate panel clearly is taking a broad, aggressive shot at the managed healthcare industry that will become the starting point for debate when the Legislature begins meeting in mid-January.

Long Session for HMOs

What is clear is that it's going to be a long session for HMOs, says Lisa McGiffert, a senior policy analyst at the Consumers Union Southwest Regional Office in Austin. "There is no doubt that some people are really mad at HMOs," she says, "but this is a rational response to problems that have been identified with HMOs."

The industry was battered by pro-consumer legislation last session, and Mr. Wurzel says many of the recommendations appear to have their roots in the stormy debate over the Patient Protection Act. The measure won the approval of the Texas House and Senate, but Gov. George W. Bush vetoed it, primarily because of the potential costs of a clause that would have allowed HMO members to "buy up" to a less-restrictive health-care plan.

Since the veto, many of the less-costly provisions of the act have been enacted through rules written by the Insurance Department. Some of the major legislative changes would codify those rules in state law, meaning that HMOs that didn't follow the law could be subject to lawsuits and not just to administrative penalties.

"If those changes make people feel better about HMO regulation, then that's great," says Mr. Wurzel. "At least we know where those are coming from. But we're not sure where some of these other [proposals] are coming from."

Sen. Sibley says HMOs are nervous because "they're the new kids on the block and they've been relatively unregulated."

Support From Physicians

Though copies of the proposals are just beginning to circulate, so far they seem to have won the support of the state's largest physicians' organization, the Texas Medical Association. It generally has been at odds with the HMO industry because of their differing roles: HMOs are trying to rein in medical costs by limiting access to doctors. In fact, the Patient Protection Act was supported by doctors and fought by HMOs.

Connie Barron, associate director of legislative affairs for the 30,000-member Texas Medical Association, says the physicians' organization is "very supportive of the recommendations. They're very reflective of the testimony that the senators have heard and reflective of issues that are important to physicians" and consumers' groups."

Mr. Wurzel, however, sounds unconvinced. Some of the proposals, such as one that would only let medical personnel review medical claims and appeals, aren't a problem, he says. Other proposals, such as the one that would let the state insurance commissioner set maximum waiting times for scheduled appointments, he says, are "inappropriate." Mr. Sibley says such waiting time limits would be restricted to situations where care was needed quickly.

But the HMO industry, Mr. Wurzel adds, is especially concerned about a vague recommendation in the report that deals with health-care-plan liability. "Managed-care organizations should be held accountable for negligent decisions which result in the denial of medically necessary treatment which results in injury to an enrollee of the plan," the recommendation states.

Claiming Immunity

Traditionally, HMOs have been shielded from state lawsuits by federal law. Managed-care organizations also have claimed immunity from medical-malpractice lawsuits by contending that they're administering medicine, not practicing it. So a proposal to make HMOs accountable, says Mr. Wurzel, is "not a statement that anyone would object to. But what does it mean?"

If Texas opens the door to easier liability lawsuits against managed-care plans, it will be the first state in the nation to do so. Florida Gov. Lawton Chiles vetoed similar legislation earlier this year on grounds it would send health-care costs soaring. In the meantime, Mr. Wurzel says, he takes consolation in the fact that "it's a long way to go from that statement to a piece of legislation."

The liability issue is the biggest legislative concern for the HMO industry, but it's not the only one. And other recommendations coming from the Senate committee are far less ambiguous in their wording and intent.

Mr. Wurzel is especially concerned about one recommendation that would prohibit exclusivity clauses in many contracts with physicians. Such clauses generally prevent the physician from treating patients who are members of other healthcare plans. The clauses have been a big competitive weapon for HMOs, which try to lock up all the doctors in an area before competitors can.

"They're going to say that two parties can't get together and sign an exclusive contract?" asks Mr. Wurzel, incredulously. "I think we'd have some concerns about that."

Judging Performance

HMO officials say they're also bothered by another proposed method of judging their performance. It would require the Office of Public Insurance Counsel or another independent organization to rate the performance of health-care plans across the state, an idea that hasn't drawn raves from the Insurance Department.

"We don't feel it's especially appropriate to rate people if we're regulating them," says Rhonda Myron, director of governmental affairs for the department. She says a rating system could be awkward because it would make it appear that the department favors one health plan over another.

And Mr. Wurzel notes that lawmakers created the Health Care Information Council during their most-recent legislative session to track quality concerns at hospitals and at HMOs, although the council has yet to release any major statewide report. Another report, he says, "is going to make it more confusing and worse for consumers than just one state report."

The financial-solvency proposal that raises so-called surplus requirements to $1.5 million that HMOs must have on hand isn't expected to be a problem for the state's large managed-care plans but could create difficulty for smaller plans, particularly HMOs operated by hospitals.